Introduction to Stocks (Part 4) - The Conclusion

As all good things come to an end, this post is the final post in regards to the multi-post series in regards to "Introduction to Stocks". Below final portion of the information given by our presenter:

Tax provisions for trading short term vs. long term (25% vs 15%)

If you hold a security for less than 1 year, then you will have to pay a higher tax on your capital appreciation (the difference between what you paid for the stock, and what you sold it for). It is very high and around 25% (could be a little more, little less). Yet if you have the stock for more than a year, then you only have to pay around 15% (may be more, may be less) for your capital gains.

If you lose money on the stock, then when you trade it, you can use it to offset your capital gains on the stock (if you lose 25% on a holding, and gain 25% on a position, sold both, your net tax liability would “theoretically” be zero…Uncle Sam may still find a way to tax you though!). This is why towards the end of the year you see a mass selling off and activity in the stock market as large companies/institutional investors as they are responsible for a majority of the volume activity in the market. They sell holdings that were down during the year to help out with their tax liabilities. Then buy them back at the beginning of the year for a cheaper price than they paid for them.

You are also taxed on dividends (income gains).

Recommendations on starter books/Website

A Message to Garcia, Elbert Hubbard
Mad Money Book, Jim Cramer (any one of his collections are a good way to start. Gives you a good breakdown of the basics including understanding how the business cycle works- what we are going through right now, late stage cyclical trends, early stage cyclical trends, etc…)
Financial Dictionary, Webster
Old Financial Textbooks, Amazon.com/Ebay books
A Zebra in Lion Country, Ralph Wanger
The Intelligent Investor, Benjamin Graham
Richest Man in Babylon, George S. Clason

And this concludes the information presented by our presentation approximately a month ago. This is good information and I just spent a few moments today reviewing it all and bringing it all together.

My personal thoughts is that getting into the stock market is risky business if you do not understand the basics. It parallels much to the occupation of an electrician or chemist, if you are not aware of the dangers/risks, you can really hurt yourself. I encourage you to research and learn as much as you can about stocks, however, at some point, you have to take the knowledge that you have armed yourself with and put yourself in a position to learn from experience.

As usual, if you have any questions or comments, please leave them below or ask them on the group list.